Expanding Overseas

The Best Place for Retailers? Chile. Uruguay Is Pretty Good, too

Quick: Which are the best places in the developing world to set up shop? Did you guess Chile? Uruguay? Kazakhstan? All three figure among the top 10 locations for retailers, according to the 2014 Global Retail Development Index put out by A.T. Kearney today.

The ranking takes into account a country’s wealth, logistical and regulatory environment, and overall riskiness to “persons, property and principles.” The idea is to select those countries that have just enough of all of the above. Too little and it’s tough to do business. Too much and it’s tough to stand out. Basically, A.T. Kearney recommends that companies consider those places that are just stable enough.

So: Chile. According to the report, its economy expanded 4.4 percent last year and is expected to grow about the same amount this year and next. Chileans already shop online: Seven out of 10 households using the Internet made at least two purchases last year. The average household spent $158 online. There’s also several new malls in and outside Santiago, Chile’s capital.

The report calls Uruguay “a solid retail oasis” amid struggling neighbors. Still, its population is under 4 million, so all the investor friendly policies in the world can generate only so much interest. And Kazakhstan? Well, Kazakhstan has vast natural resources, which makes for increasing consumption of luxury goods. Christian Dior (CDI:FP) and Giorgio Armani are among those who entered the country recently and are already expanding.

You’re wondering about China, which ranks No. 2 on the index. (Last year it was No. 4) Retail sales increased 13 percent overall in the country in the past year, and online sales grew 42 percent. But labor and rent costs are increasing, local competition is strengthening, and economic growth is weakening. Walmart (WMT) and Tesco (TSCO:LN) both closed stores in the country in 2013.

Among the least desirable places in the developing world for retailers: Vietnam, Namibia and Azerbaijan. A final word about Azerbaijan: Its main problem is that it’s a “maturing market.” In other words, too much stability and not enough risk.